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The Changing Face of Offshore Programming
teambpsi writes "BusinesWeek Online has an opt-ed piece on the trend in offshore programming pricing going up, with domestic rates going down. As a contractor, I've seen the downward pressure on contract gigs now to rates lower than what I was charging over five years ago. Dell Computers recently announced that it was bringing its customer service back on-shore, I wonder if this might be the start of some bigger trend -- maybe 'buy american' could be our new battle cry ;)"
maybe 'buy american' could be our new battle cry ;)
Wasn't that Walmart's battle cry for years... until it became convenient for them to forget it in favor of another battle cry that generated yet more money?
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*beware the cute-bunny virus
Why doesn't freetrade work for the consumer? After all my goverment wants to make it illegal/claims it is currently illegal for consumers to import drugs from canada.
Why is it ok for large companies to benefit from freetrade but wrong for regular people to?
As for your doctor comment, some hospitals are sending xrays/mri scans oversees to be read.
I would disagree. The bigger companies do think about such costs. Thats why you get a 25-50% saving when the salary difference is way higher. Similarly they are careful what and how they use very cheap but possibly lower quality resources. So for example who you get for a long distance phone billing problem depends on how much you spend a month.
Places like India are getting more expensive because they are getting way better at doing the jobs well. The experience and infrastructure is now there. Much of the really low grade work now goes elsewhere.
Indians, Pakistanis or Chinese. Really.
I'm an Indian, and let me tell you, the culture is racist to the core. Hell, even within the race there's the caste system, and don't for a minute believe anybody who tells you that it's dead.
Most cultures are ferociously racists: the only exceptions are places where there are too few people of other races to even notice (some parts of England, say, are pretty chilll) or America, where the fight against racism is a big historical driver.
This is one thing which I think Americans have got right and can teach the world: how to deinstitutionalize and stigmatize racism to the point where basic values change for many, if not most, people.
Seriously: I think that America has an incredibly tolerant and non-racist culture over all. Festering throwbacks excepted.
Hexayurt - open source refugee shelter,
I know you are a troll, and I shouldn't feed you but hey, It's 2004....
The smart companies never moved their programming and tech staff from in house, as they knew that the only way to get the best quality was to keep it at home.
We had a few phb's try and convince the CTO and the CFO that moving the entire development staff to an outsourcing firm... they almost suceeded until the old man (read that as the dude that built this company..) that hold's 51% of the stock said, "no way in hell. there is no security, no quality control, and no way for us to completely control the process." he went on about how only fools would trust another company with their secrets and their future.
The old man did this on one of the telecasts in front of the whole company intentionally making the Executive staff and the phb's look foolish for chasing small dollar returns for giving up the stable.
A company with strong leadership that actually looks toward the future sucess does not chase the easy dollar.
I'm not whining, I'm proud to have a leader in the company that isn't as incompetent as the management that thinks like you do.
Do not look at laser with remaining good eye.
I moved four projects to India with reasonable success. We did not use a lowest-cost provider; instead, we used a company that charges more than Wipro or Infosys, but fields better talent than they do (in fact, they cherry-pick from Wipro and Infosys for new recruits).
Here are my conclusions:
1) We were able to ramp up faster than if we had tried to hire locally.
2) We were able to overcome personnel issues more quickly -- the vendor was able to add higher-powered programmers very quickly when they got into trouble, and "swarm" the problem with bodies. In our case (simple Web apps) it worked, although there are situations in which it obviously would not have worked (mythical man-month, blah blah blah).
3) The quality of the finished product was reasonable. Call it B/B-. Which was OK for us, maybe not good enough for some, but acceptable.
It turns out that if I had hired a much smaller number of local programmers as permanent employees (consultant rates would not have worked) -- very good ones at market prices -- and they had performed up to expectations -- I could probably have brought the same projects in on the same schedule for the same price. I probably would have ended up with a better architecture, and better code.
So maybe it's a wash. Except, I would have had the following problems:
1) Hire/fire. When the work was over, I didn't need the teams any more. With the Indian vendor, I could cut back without worry. With permanent hires, I'd have a serious morale problem.
2) Risk. If my gunslingers ran into a problem, I wouldn't have been able to "throw bodies" at it. My budget wouldn't have allowed for that.
3) Maintenance risk. The Indian teams can be scaled way back, but I could still keep 3 people on the project for continuity. If I scaled back my own teams similarly, I'd only be able to save one job, and if that person quit, I'd be hosed.
So there are a lot of subtle factors that play here. The Business Week guy alludes to them, but doesn't really itemize them well.
Places like India are getting more expensive because they are getting way better at doing the jobs well.
They've been very good at what they're doing for several years now. Instead they're getting more expensive because they've gone from being a "secret" for a couple of companies to leverage the first-world education (for some) with third-world wages, to being a well known fact that every organization and their brother is racing to join the trend. Obviously there are a finite amount of highly trained, intelligent software engineers in India, so there is now competition for their services. Hence you have salary inflation. I've heard that the ascent of salaries has been absolutely dramatic. Capitalism at work.
Much of the really low grade work now goes elsewhere.
Some time ago there was an idiotic outer-worldly statement by one of the execs of one of the big outsourcers that if Indian developers got too expensive, they'd just switch to Vietnam, etc. This is so ridiculously imaginary that it boggles the mind. India, as you know, is a hot spot because of three things:
-They have a fabulous education system for some
-They are a reasonably stable, generally low corruption country
-Because of being a British controlled area, they have a large number of English speakers
Without all three of these factors, it's a no-go except in exceptional circumstances. It's for this reason that even in the high-education countries of Russia and China they are only a drop in the bucket compared to India. The idea of other areas like Vietnam is just absurd.
It isn't just accent. It is huge, huge, huge cultural differences. Sometimes you would be able to understand their words more easily if it weren't so difficult to believe what they are saying.
About two weeks ago I was helped by a Microsoft tech support person in New Delhi, or maybe Bangalore, I forget which. Some otherwise correctly running Windows XP computers had trashed themselves so that it was impossible to run the Recovery Console. The MS tech support guy had absolutely no clue about how to fix the problem, although he did have plenty of time-wasting ideas. This is not unusual, of course. The Psychic Friends Network is sometimes equally as good as Microsoft technical support at understanding bugs in Microsoft software.
What made this technical support call different is that the Indian Microsoft technical support guy was the most arrogant person with whom I've ever talked. He made Larry Ellison look humble. He was cheerful enough, but entirely useless doing technical support because of believing that I am an inferior who should believe any lie he tells me.
After a while, for me it stopped being a support call and began to be an interesting social interaction. In Hindu culture, if you don't belong to one of the castes, you are an untouchable, a person below any of the castes. Obviously, I don't belong to any of the castes, so you know where that left me. To him, I was of the social class that cleans up after bodies that have been burned on a funeral fire, or empties latrines, or eats dogs.
Many, many Hindus are little influenced by the caste system, but this guy seems to embrace it completely. Whenever I would tell him that it was obvious that what he was saying was untrue, he would tell me another lie. No amount of mentioning that what he was saying was obviously incorrect stopped him. To him, anything that popped into his mind should be gold to someone like me. I would say, "You invented that; there's no reason to think that whatsoever", and he would just cheerfully continue with another invention.
If you aren't familiar with the arrogance and disconnection of the Hindu caste system, here is a quote: "By his very birth a Brahmin is a deity even for the gods and the only authority for people in this world, for the Veda is the foundation in this matter." -- Manusmrti 11:85.
For another example of Indian arrogance, see this story by an Indian : Hindian Arrogance on a Tourist Bus.
We hear a little about the problems of outsourcing technical support, but things are a lot worse than most stories say.
So why don't you hear a lot of people complaining that their airline or credit card company customer reps can't talk good American? Because there are plenty of well-educated Indians who speak fluent western English. All they need is a little practice on their idioms and pronunciation, and you can't tell them from a native of Duluth. Not over the phone anyway.
So it's perfectly possible to run an operation out of Bangalore or Dehli without communication problems. And yet you hear all these horror stories. I have a few myself: I subscribe to techwr-l, and we often get lame questions from Indian writers, usually basic grammatical stuff even a American 4th grader or a Slashdot editor would know.
My inference is that the companies driving the offshoring trend aren't satisified with the pay differential between San Jose and Bangalore. So they don't hire people with degrees from India's universities or engineering schools. (Which produce a lot of good people -- I've worked with some of them.) They hire folks whose educational achievements culminated in one of those "learn programming in 2 weeks" schools. Their English is hard to follow, not because of their accents, but because its one of the highly-localized English dialects that Indians use amongst themselves.
Here's another horror story. If you're a tech writer in the San Francisco Bay area, you've noticed a lot of headhunters trying to fill a very strange job in San Ramon. What's in San Ramon? A bunch of engineering outfits that decided that rents in Silicon Valley were too high -- never mind a limited local talent pool, if people want to keep their jobs, they'll commute or move. One of these outfits is the development arm of what used to be Pacific Bell, now a nameless subsidiary of SBC.
You need massive databases to run an RBOC, and this one has fallen way behind on database development. People complain of billing errors and outdated listings. There's a hair salon in San Rafael that can't get SBC to put its Yellow Pages listing in the proper category -- for two years running it's been listed under "Massage". Which sounds funny, until you consider the kind of lowlifes who respond to a massage ad for "Curl Up With Kelly".
So these guys in San Ramon are scrambling to update the software. They need a tech writer who can document their work. Said writer needs to be able to read source code in half a dozen languages, including the venerable Revelation Basic. Oh yes, and the writer has to work for $25/hour.
Well, I have the skills and I need the work. But that's hardly a reasonable wage, especially considering the two-hour commute. (It's a short term contract, so relocation is not practical.) I'd be better off working at the Starbucks down the street.
When I pointed out the absurdity of offering entry-level pay for a job requiring advanced skills, I was told that all the costs were measured against the alternative of moving the whole operation to India. Which is total nonsense. I'm sure there are plenty of Indian operations that could engineer a fancy database from scratch, and do a good job very cheaply. But SBC doesn't even want to spend that much money. They want to continue hacking 20-year-old code running on legacy platforms. Do they think that India is swarming with experts on the PICK database system?
The whole offshoring thing is just the latest development in a nasty long-term trend. Even before the dotcom bubble burst, Wall Street was dominated more and more by numbers dweebs, people who have no understanding of the industries and businesses they're investing in, and have an idiotic obssession with the bottom line. They hate costs more than anything. Even if you're turning a
I don't deny the caste consciousness still strongly present in many Indians, but I don't think it's relevant here. We Westerners are exempt from the system. I've worked in India and with Indians in the West, and among the many perplexing cultural differences I've run into, the inclusion of *me* in their caste system was never one of them.
I think that what you encountered was just an individual personality. I've had these experiences with Indians, too (especially bureaucrats who wanted to prove their importance), but I've had similar experiences with people everywhere. I've managed a tech support group in the US and some of my own people acted this way (until I either stopped it or got rid of them.) It wasn't correlated to their skill level either, just to the degree to which they seemed to feel the need to prove to others that they were smarter (which seems to afflict geniuses and idiots in roughly equal proportions.)
"Those who have never entered upon scientific pursuits know not a tithe of the poetry by which they are surrounded."
In part, the offshoring (and all outsourcing) trend is driven by the fact that it is difficult in the US, and other developed countries, to decrease nominal wages. A firm may have to cut the price of its goods by 10% in order to compete. But if the firm's workers have not become more productive, so that the value of their labor has decreased by 10%, it is quite difficult IN PRACTICE to cut their wages. In general, the only way to do so is to lay off the existing workers and hire new ones at a lower wage rate. Doing this effectively, at least in the US, tends to put the firm in violation of age discrimination laws, as the highest-paid workers are generally the oldest ones. Outsourcing an entire department avoids that particular problem. And as long as you're outsourcing, you might as well look for the cheapest alternate source that you think can do the job.
Several of the comments above have been from consultants who say that the rate that they can successfully charge for their services has decreased sharply. What the firm pays a consultant is determined for each project; changes in the supply of and demand for consultants comes into play each time, as does the firm's view of the value of the project. The same is not usually true for an employee. Last year we had a hot project in a new, highly profitable area; this year we're doing maintenance on older, less profitable products; but the firm will have difficulty changing the wage rate every time they move someone to a different project.
One area where this plays out in a particularly frustrating fashion is with teachers. My kids' high-school teachers are no more productive than my own teachers were 30 years ago. The classes are just about the same size and the material they teach is roughly the same. Pundits point at standardized test scores and assert that the quality of the product has declined in the last 30 years. That's true in another sense as well -- I am almost sure that the average real wages earned by people whose education stops at high school (real wages being a measure of the value of their contribution to the economy) have decreased over that period. Simple economics would suggest that real wages for teachers should have declined (which may, or may not, have occurred). Given that the value of many of the benefits that teachers receive as employees (health care, pensions) have increased sharply over time, the real salary rate should have gone down a LOT.
I work at an overseas CMM Level 5 IT company in Korea that started offshoring recently and have been working with a team of guys that we brought from India. Though I just started with the company as a software developer, I almost immediately became a member of their team and a full-time interpreter -- though I was much closer to being a manager as many people at the company prefer not to deal with them.
I can't say much positive about their attitudes and work either, though I don't want to stereotype all ethnic Indians. Whenever I visit their cubicles, they are browsing the web or chatting with their buddies rather than completing their assigned work. I wasn't receiving any respect from certain members of the team, mainly because I had fewer years of experience in software development. However, it certainly did not appear that they had the four years of experience in Java cited on their resumes. I was reviewing their code and fixing major logic errors in code and the grammar mistakes and typos made in the comments. This was work they could have easily done themselves in the very lax 3 week deadline they had to fix their 3-5 test cases. Instead, I spent two weeks fixing their code and writing the documentation that they had "written". I asked one guy to fix a mistake in two of his test cases, pointing out the error and explaining how he could fix it, and he got really angry at me and sent me e-mails about me being the newbie. Since I was not the manager he refused to change his code.
My co-worker has been also working in India for a few months and he does not appreciate the attitudes of certain programmers either. Some of them decided to change some of the code our company had written causing several bugs to appear in the build. None of the developers would take blame for it, though it was probably obvious who had changed it from the PVCS logs.
These experiences have led me to decide to transfer departments and work with people that have experience that actually counts, even if they are not involved in software development (which I hoped to pursue by finding an overseas job and obtaining experience with the company).
There are two questions companies should consider when making the decision to offshore (outsource) to India which directly relate to cost efficiency:
1) Do we fully understand their culture and will conflicts in culture present a problem? In other words, how much additional money and resources will be spent on interpreting and managing their work, making sure that they maintain a certain level of quality?
2) Are we just outsourcing to become trend-followers, blindly following the reocmmendations of McKinsey, Gartner, and Accenture to find cheap labor in India and China? Do we know exactly how much domestic labor will cost in current times (older BW article)?
It's my opinion on getting them to be efficient workers is that you need an Indian motivator/manager who understands their culture very well, is older than them and has a more impressive resume. Then, have someone from your company who is very knowledgeable about business processes and the related field, in this case software development, communicate the requirements to the Indian manager.
My manager has been assessing the quality of their work to present to our CTO whose initiative was to increase our offshoring in India. Does anyone have a good way to measure the the value of a software developer which includes factors such as cultural differences and communication problems?